The South African rand was the worst-performing emerging market currency on Thursday morning, amid confusion over changes to rules over for the country’s mining sector that have unsettled investors.
Em currencies fell across the board as the dollar made gains after yesterday’s Federal Reserve meeting, but the rand tumbled much further than its peers, and was down 1.9 per cent at publication time to 12.8690 per dollar.
Comments from South Africa’s mining minister suggested the government would force miners operating in the country to increase their minimum black-owned stakes from 26 per cent to 30 per cent.
The statements hit shares in mining groups including Anglo American, despite some confusion over the full details of the new mining charter, which will not be formally gazetted until later today.
The mining industry has complained about the lack of a consultation process while the new regulations were being drawn up, and has said it will consider legal action. However, the government has defended the plans as part of its goal of bringing about “radical economic transformation” to share economic benefits among the country’s black majority.
Mining accounts for around seven per cent of South Africa’s economic output, and Tyler Broda at RBC Capital Markets suggested the new rules are likely to lead to “a drop in new investment across the whole industry”.
South Africa’s economy has already been struggling in recent months, and data released last week showed the country unexpectedly entered recession in the first quarter.
Investors have been further unsettled by infighting within the ruling African National Congress, leading ratings agency Moody’s to cut the government’s credit rating last week.
In a separate press conference on Thursday morning, finance minister Malusi Gigaba insisted that “the glass is half full not half empty”.
He said government intervention will help to “put the economy back on a growth trajectory”, adding: “we are in a difficult situation, but let’s not be despondent”.